China Eyes Mobile Internet Investment 中国或将开放移动互联网市场
New signals coming from Beijing indicate the mobile Internet could be the first area of China’s telecoms sector to open to foreign investment, following years of an informal ban on outside investment in the sensitive space. The new signs, coming from the telecoms regulator, would be consistent with recent moves over the past year that have seen Beijing officially approve new China-based cloud computing ventures backed by US technology giants IBM (NYSE: IBM) and Microsoft (NYSE: MSFT), both of which have an Internet focus.
More broadly speaking, this new opening reflects the realization by Beijing that its closed approach to the telecoms sector over the last decade has been largely a failure, causing China’s industry to fall further and further behind global rivals. With that realization in mind, the regulator has issued a steady stream of signals indicating it is preparing to open the sector to major investment from both foreign and domestic players, breaking the longtime monopoly held by the country’s 3 major state-run telcos. (previous post)
In the latest sign of where Beijing’s priorities will lie as it opens the sector, media are quoting a vice minister at the Ministry of Industry and Information Technology (MIIT) labeling as “backward” many of the key technologies in China’s mobile Internet space. (Chinese article) The comments, made by Vice Minister Liu Lihua at an industry event this week, seem to be a direct criticism at the lack of innovation by the country’s 3 wireless telcos, China Mobile (HKEx: 941; NYSE: CHL), China Unicom (HKEx: 728; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA). I completely agree with Liu, as these 3 companies have shown themselves to be quite poor at developing new products and services despite their enviable exclusive access to the world’s largest mobile market with some 1 billion subscribers.
In his remarks, Liu went on to say that global rivals have taken all the initiative in developing innovative new services for the mobile Internet, costing the 3 Chinese telcos to lose a big opportunity to become leaders in the space. Liu’s remarks continue the steady stream of signals this year that has seen the MIIT indicate it will open China’s doors to outside investment in its telecoms sector, both from domestic and overseas players.
These latest comments seem to indicate that partnerships between global players and Chinese firms will be the preferred method of investment, and that mobile Internet will be one of the first areas to open. That could be good news for big foreign names that focus on the mobile Internet, including the likes of providers of services like Apple (Nasdaq: AAPL) as well as some of the more aggressive foreign telcos like Verizon (NYSE: V), Vodafone (London: VOD) and AT&T (NYSE: T).
We’ve already seen some signs of potential partnerships earlier this year from China Telecom, which launched a partnership in Britain with European network operator Everything Everywhere, which counts France Telecom (Paris: FTE) as one of its major stakeholders. Unicom also counts Spain’s Telefonica (Madrid: TEF) as one of its major investors, and has a previous similar relationship with Korea’s SK Telecom (Seoul: 017670). I would expect some of these existing relationships, or possibly some new ones, to result in some major new joint ventures in the mobile Internet space, with 1 or 2 big announcements likely over the next 12 months.
Bottom line: The latest comments from China’s telecoms regulator indicate mobile Internet will be priority as Beijing opens China’s telecoms market to foreign investment.
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